You know you need car insurance to protect you against big losses, but how much car insurance is enough? Should you cut down on coverage to save on costs? At Philleo Agency Insurance, we know everyone wants to save money on car insurance, but that should never be more important than having enough insurance protection to meet your needs. This article will discuss important reasons why having the right types of coverage and adequate limits is the most important part about purchasing car insurance.
To Repair or Replace Your Damaged, Destroyed, or Stolen Vehicle
When your vehicle is damaged – and at least statistically speaking, it will be – how will you afford to repair it? If you find out the damage is too severe to be remedied, will you have the cash on hand to pay for a replacement? Collision and comprehensive insurance provide coverage against physical damages to your personal vehicle. It is the type of coverage that protects your investment and the monetary value of your car.
Collision insurance covers damages to your vehicle when a car accident causes them. A collision can be distinguished as a collision involving your vehicle with another vehicle or an immobile object, such as a tree.
Comprehensive insurance covers damages to your vehicle when they are caused by random and unexpected events that are generally outside of your control. Examples include damages caused when you hit a deer that darts across the roadway or when a thief takes off with your car.
Claims against your insurance for physical damages to your personal vehicle typically require that you pay a deductible. The deductible is the out-of-pocket amount you are responsible for paying toward the cost of each claim no matter how big or small. You can choose your deductible when you purchase your policy. Some drivers prefer a small deductible that eases the financial burden of filing a claim, whereas others prefer a large deductible that reduces the upfront cost of insurance premiums. Whatever you decide, make sure it is an amount that fits your budget and preferences.
There are no insurance limits to choose when it comes to collision and comprehensive coverage. Most vehicles are simply insured for their actual cash value or ACV. Some vehicles – particularly antique cars and collector vehicles – are insured for an agreed value. The terms of your coverage will be listed within your policy. When you file a covered claim, your insurer will pay for the cost of repairs minus the value of your deductible. If the costs are very high – more than the ACV of your car – you may receive a check from the insurance company reimbursing you for the total loss of your car.
Who Needs Collision and Comprehensive?
Most drivers need collision and comprehensive coverage even though it is not a legal requirement. Not only can it protect you against major financial loss, but it may also be mandatory coverage for drivers who lease their vehicles or finance them through a lender. This helps to protect the financial interest of the dealer or lender until the vehicle is paid for or returned.
To Repair or Replace Someone Else’s Damaged Property
Accidents often involve more than just one vehicle. If you cause a collision that results in damage to another person’s car or property, you could be financially responsible for compensating the victim for his or her losses. All drivers here in Wisconsin are required to carry a minimum amount of property damage liability insurance. Unfortunately, the minimum coverage you need to stay in compliance with the law is often far too little to cover what you need after an accident.
If you crossed the median one night and hit a brand new Chevrolet Tahoe head-on, you might owe as much as $50,000 in replacement damages. If you plow through a fence and into someone’s kitchen, you might have to pay to replace countertops, appliances, interior walls, exterior walls, landscaping, and the fence. If you only had the minimum $10,000 in property damage liability protection, the victims or their insurance companies could pursue your personal assets and income for the remainder of the damages.
Having high enough limits on your property damage liability coverage could protect you against a major lawsuit if you are at-fault for an accident.
Continue reading part two of “How much car insurance is enough?”